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By Sara Hansard
States that are looking at ways to get people enrolled in health insurance following the elimination of Obamacare penalties in 2019 are likely to enhance outreach and create innovative new ways to get people covered.
Congress eliminated the Affordable Care Act individual mandate penalty for not having qualified coverage as of 2019, but people will still be subject to it until then. In the meantime, legislation has been considered in seven states and the District of Columbia to make up for eliminating the penalty, according to information provided to Bloomberg Law from the Blue Cross Blue Shield Association (BCBSA). In most cases the bills either failed to pass the legislature or don’t have enough time to get passed this year, but innovative provisions in the proposals—such as automatically enrolling people who aren’t covered—are likely to see the light of day in future legislative sessions and get picked up by other states.
Even in Democratic states, the unpopular individual mandate and its associated penalties have remained the thorn in the side of the ACA. But health insurers and ACA supporters insist that some mechanism is necessary to keep healthy people in the individual health insurance markets so that premiums don’t rise more than they already have for those remaining in that market. The states that are considering instituting a replacement to the individual mandate penalty are mindful of this as they look for ways to spread the financial risks of covering people with high-cost medical claims.
As the 2017 tax filing deadline looms April 17, there is confusion about whether people are still subject to the individual mandate penalty. Under the ACA, people who don’t have comprehensive minimum essential coverage and who haven’t received an exemption are required to make a shared responsibility payment. The ACA’s definition of minimum essential coverage includes exchange plans as well as most employer-sponsored coverage. For 2017 and 2018 the penalty for not having coverage is $695 per adult, $2,085 per family, or 2.5 percent of income, whichever is greater, capped at the national average price of a bronze-tier plan sold through the ACA marketplaces, which are the lowest-coverage level plans. The Tax Cuts and Jobs Act of 2017 eliminated the penalty as of 2019.
In 2017 the Congressional Budget Office estimated that repealing the mandate would reduce federal deficits by about $338 billion over the 2018–2027 period and increase the number of uninsured people by 4 million in 2019 and 13 million in 2027.
No state has yet acted to replace the individual mandate penalty following passage of the federal 2017 tax law. Massachusetts’s 2006 “Romneycare” health law includes a penalty, making it the only state currently with a penalty in force for not having qualified coverage.
New Mexico has enacted legislation creating a study committee on requiring the individual mandate, Tess Thomson, BCBSA strategic communications consultant, told Bloomberg Law in an email April 11.
Bills introduced in Maryland and Washington that would have addressed the individual mandate failed to pass the state legislatures, Rachel Schwab, a research associate with Georgetown University’s Center on Health Insurance Reforms, told Bloomberg Law April 11. However, “I wouldn’t rule out a future legislative session” for enactment, she said.
Other states that have considered some type of individual mandate legislation are Hawaii, New Jersey, Vermont, Connecticut, and the District of Columbia. Many of them track closely with the federal ACA mandate, Schwab said.
Many of the states considering legislation would get enhanced authority to take actions to boost marketplace enrollment, Schwab said. “It’s a new avenue for them to approach their education and outreach,” she said.
The legislation in Maryland that didn’t make it out of committee would have included an innovative approach under which penalties paid by individuals could be used as down payments for coverage, and, under the bill, people paying the penalty could have been automatically enrolled into either exchange coverage or Medicaid, depending on their eligibility, Schwab said. Maryland enacted a bill establishing a study committee to look at stabilization measures including a state individual mandate and ways to use penalty payments, as well as another bill that will allow the state to set up a reinsurance program to cover high-cost claims.
The District of Columbia is most likely to enact legislation that includes a penalty for not having coverage. The provision is part of the district’s fiscal 2019 budget bill, and will likely be discussed at a budget hearing April 19, Mila Kofman, executive director of the DC Health Benefit Exchange Authority, told Bloomberg Law April 11. The individual market exchange, run by the district, covers about 18,000 people, she said.
The District of Columbia provision includes the same penalty system as the federal ACA, Kofman said. But unlike the federal system, the district’s provision would automatically exempt people from the penalty if they are below set income levels without requiring them to apply for an exemption, she said. Under the ACA people must apply to the federal Department of Health and Human Services for exemptions from the coverage requirement in order to avoid the penalty.
In addition, the district’s bill includes provisions to notify people who are subject to the fine that coverage is available, Kofman said. “It would help us because the tax and revenue office here would be doing outreach directly to people who were uninsured,” she said. “The whole idea behind the fine is not to collect it but to get them covered.”
Without any market stabilization actions, the District of Columbia’s claims costs are estimated to rise 7.2 percent in 2019, Kofman said. The legislation has support from diverse groups, including the local Chamber of Commerce, hospital association, and America’s Health Insurance Plans, she said.
In Vermont, where Gov. Phil Scott is a Republican and both chambers of the General Assembly are controlled by Democrats, the state House of Representatives has approved legislation that is now being taken up in the state’s Senate. The Senate removed a provision that would have established an individual mandate, Adaline Strumolo, health care director for the Department of Vermont Health Access, told Bloomberg Law in an email April 12. Under the bill, a working group would examine options for enforcement and administration of an individual mandate, she said.
While fees for not having qualified coverage could be considered, “We’re also interested in looking at the opposite approach—incentives to have coverage as opposed to penalties,” Strumolo said. For example, the working group will likely considering automatic enrollment mechanisms to sign people up for coverage, she said.
The bill “definitely had a lot of momentum in the House; less so in the Senate,” Strumolo said. Gov. Scott’s administration supports the bill “as a first step,” she said. “If there’s a way to go further, I think there’s openness to that, but there are resource considerations. We want to be realistic about what sort of program we could put in place on a short timeline.”
While some states are moving toward ways to enforce an individual mandate, Ohio is going in the other direction. In its March 30 request for a waiver from ACA provisions, the state seeks to be exempted from the individual mandate altogether. Removing the mandate wouldn’t impact the individual market because Congress already zeroed out the penalty, the state Department of Insurance said.
Indeed, a Kaiser Family Foundation survey published April 3 found that 90 percent of people in the individual market said they would continue buying health insurance even without the penalties in 2019.
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